Given the following information and assuming a 20% CCA class, what is the NPV for this project? Initial investment in fixed assets = $800,000; initial investment in net working capital = $200,000; life = four years; after-tax cost savings = $250,000 per year; salvage value = $30,000; tax rate = 35%; discount rate = 16%.

Question

Quizplus · Accepted Answer

The NPV of the project can be calculated by considering the initial investment, the after-tax cost savings, the tax shield from CCA (Capital Cost Allowance), the salvage value, and the recovery of net working capital at the end of the project's life, all discounted back to present value at the project's discount rate. Given the information, the correct NPV calculation would involve these steps, leading to an NPV of $147,261, which aligns with option C. This takes into account the depreciation of the fixed assets, the tax savings from that depreciation, and the cash flows from operations, adjusted for taxes and discounted at the given rate.

Given the Following Information and Assuming a 20% CCA Class